Republican proposal shot down as US moves closer to default

A cleaner dusts a statue of Alexander Hamilton, a founding father of the US, in the Rotunda on Capitol Hill in Washington yesterday as the US government shutdown entered a third week. Photograph: Joshua Roberts/Reuters

A possible congressional deal to avert a default after the United States reaches a debt limit tomorrow fell apart yesterday as Senate Democrats and the White House reacted angrily to a sudden Republican proposal.

As the US government shutdown entered a third week and the country faces an unprecedented default within days, president Barack Obama dismissed, because of the conditions attached to the proposal, a plan from Republicans in the House of Representatives to reopen the government and extend the debt ceiling until February.

The proposal from House Republicans came as the Senate worked on a cross-party plan to fund the government until mid-January and to raise the debt ceiling until February, creating a window of opportunity until mid-December to end the political standoff and agree a longer-term budget.

DefaultSuch a deal would end the government shutdown, which is estimated to have more than $2 billion (€1.5 billion) so far, and avoid a default that would have a damaging ripple effect on the global economy.

The Senate proposal, which was still being worked on yesterday, includes a year’s delay in a tax paid by companies and labour unions on the cost of health insurance per employee and safeguards to ensure only those eligible for federal subsidiaries to purchase health insurance would receive them.

House Republicans sought again to disrupt Mr Obama’s healthcare law and proposed delaying a medical-device tax used to pay for healthcare subsidies and to eliminate similar subsidies for the president, vice-president, the cabinet and members of Congress.

Reflecting the tensions within his party, Republican House speaker John Boehner said there were “a lot of opinions about what direction to go – there have been no decisions about what exactly we will do but we’re going to continue to work with our members on both sides of the aisle”.

Angry responsesThe Republican proposal triggered angry responses from the White House and from Democrats on Capitol Hill as Congress must raise the $16.7 trillion (€12.3 trillion) debt ceiling by tomorrow before the treasury starts running out of cash and is unable to pay for federal services and repay borrowings.

The White House again blamed House Republicans for bowing to an internal far-right faction, saying their proposal was “a partisan attempt to appease a small group of Tea Party Republicans”.

“Democrats and Republicans in the Senate have been working in a bipartisan, good- faith effort to end the manufactured crises that have already harmed American families and business owners,” said a spokeswoman for Mr Obama.

“With only a couple of days remaining until the United States exhausts its borrowing authority, it’s time for the House to do the same,” she added.

The Democrat leader in the Senate, Harry Reid, accused House Republicans of “attempting to torpedo us”, saying that any bill crafted along the lines of their proposal and passed by the Republican-led House of Representatives was “doomed to failure” in the Democrat-led Senate.

Senator Chuck Schumer, a Democratic senator from New York, said Mr Boehner had decided “to light a match and throw it on the gasoline that’s already all over the place”.